On Thursday, JetBlue Airways reached a $3.8 billion deal to buy Spirit Airlines in a takeover that would create the country’s fifth-largest airline and remove a fast-growing budget carrier from the market.
This is after months of a rather messy and public exchange with Frontier, who also had an interest in adding the signature yellow airplanes to its fleet.
JetBlue previously attempted to outbid Frontier with an all-cash offer—but has successfully acquired the company in a $3.8 billion purchase of Spirit’s stock.
Right now, the two combined airlines will have a total of 458 aircraft, and more than 1,700 daily flights and control about 9% of the domestic flight market, which would make JetBlue the 5th largest airline in the country. The four largest airlines – American, Delta, United, and Southwest – control about three-fourths of the market.
Here’s what JetBlue CEO Robin Hayes said in a news release:
“We are excited to deliver this compelling combination that turbocharges our strategic growth, enabling JetBlue to bring our unique blend of low fares and exceptional service to more customers, on more routes. We look forward to welcoming Spirit’s outstanding Team Members to JetBlue and together creating a customer-centric, fifth-largest carrier in the United States.”
According to the Daily Wire, “Biden’s Justice Department has expressed concern that competition in the sector has declined after previous mergers, and the Biden administration generally has taken a hard stance on anti-trust policies. JetBlue executives have argued that combining their fleet with Spirit’s would allow it to more effectively compete with the industry’s larger players and that such competition would help drive down fares. JetBlue has also offered to surrender some of Spirit’s gates and take-off/landing slots at various airports, creating opportunities for other airlines.”
Hayes added:
“Our view is that the best way that you can bring more competition to the sector is to create an exciting, new, low-fare, high-quality national airline that can compete with the big four. So we will be making those arguments.”
‘The Daily Wire’ gives us more details of this report:
Many prominent members of Spirit’s board had previously disagreed and publicly argued that the prospective deal with Frontier was more likely to receive regulatory approval, despite the lower offered price — the final offer was reportedly $1 billion less than JetBlue’s bid.
Frontier and Spirit had been discussing a potential merger for years and had reached a tentative agreement in February of 2022, but an aggressive bid by JetBlue in April disrupted those plans. Spirit executives were unable to secure enough support from shareholders to close the deal and now find themselves in the somewhat awkward position of advocating for a merger they had vehemently opposed for months.
Here’s what Spirit Chief Executive Ted Christie said in an interview:
“Where we are today is we’ve got an exciting merger agreement with JetBlue. It’s going to create a very large, national low-cost carrier. Many things were said, but business is business.”
JetBlue will purchase Spirit shares for $33.50 per share, and the deal is expected to close in the first half of 2024.
The two companies have very different business models, and JetBlue has announced that it will raise employee salaries and reconfigure seating at Spirit to align with its own standard practices — which will inevitably raise fares. Some observers have speculated that Alaska Airlines, which has a more similar structure to JetBlue, would have been a better fit for a merger. However, Alaska Airlines uses Boeing aircraft, while JetBlue and Spirit have predominantly Airbus fleets, and in a time of desperate pilot shortages, an awkward merger is probably cheaper than cross-training and certifying limited personnel on different planes.
The Justice Department is currently suing JetBlue and American Airlines to break up an agreement between the two companies limiting competition between them in key hub airlines in the Northeast, fueling concerns that future deals may not be approved. If regulators block the merger, JetBlue has agreed to pay Spirit a $400 million break-up fee.
With the purchase of Spirit Airlines, JetBlue will now have focus in Fort Lauderdale, Orlando, San Juan, and Los Angeles, as well as the major airline hubs in Las Vegas, Dallas, Houston, Chicago, Detroit, Atlanta, and Miami.
Both airlines will continue to operate separately until the deal closes, so you will still be seeing the bright yellow in the skies for now.
Sources: DailyWire, CNBC, WSJ, ABC News
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